Wednesday, 17 August 2011

It's gruesome. As of January 2013 the Government of Ontario will voraciously EAT dead people, or more precisely, their estates. That's EAT as in Estate Administration Tax, the official name for probate fees in the province. The Government of Ontario has passed into law big changes in the Estate Administration Tax (EAT) and though the tax rate will remain the same, the new provisions for collection will make it a nightmare.

"... the new provisions require the estate representative to keep records and books of account ... the value of the assets of the estate for probate or administration purposes will have to be supportable ... valuations will be necessary for all property passing under a probated will" >>> i.e. extra effort, time and cost to get formal assessments on everything

"... The MNR will be able to assess or reassess for a period of four years after the day the tax is payable... The new procedures may also unduly delay the application for a certificate of appointment [my note - this is the document an executor needs to show everyone that he/she is legally entitled to be executor] ... there could be significant delays in obtaining the certificate of appointment and thus delays in administering the estate ... an estate representative may not wish to settle an estate until four years after the application for probate in order to limit his or her personal liability for any unpaid tax" >>> i.e. potential lengthy delays for someone to even getting started as executor. The Catch-22 lunacy of this is that without the certificate of appointment many/most financial institutions will likely refuse to provide any information, which of course can make it impossible to pay the tax and get the certificate. And then there will lengthier delays - goodness knows it takes long enough now - to wrapping up and distributing estates. And even after that, there might be messy reassessments and more to pay later.

Another lawyer, Barry Corbin, goes into more detail about increased liability exposure and complications of distributing estates as a result of the audit and compliance provisions of the new law - see Estate Administration Tax - The Nightmare Begins.

One thing is certain - the Ontario Ministry of Revenue will make sure to collect a lot more tax than now (why else would they have done the amendments?), merely from its rigorous and likely painfully painstaking application of the law. Moreover, with the structure in place, down the road one can expect increases in the already highest in Canada rates (see Canadian Tax Resource blog's table). Just wait till the government needs more money and finds that dead people are easier targets than live voters.

It's a done deal. The new law received Royal Assent May 12th. Of course, the government could forget to Proclaim the law, and it would never go into force. Maybe an election would see a new government that would see fit not to take that final step.